Supply chain companies need to watch out for struggling retail clients and protect themselves from the fallout of clients entering administration, an accountancy firm has warned today.
Over the last couple of weeks a number of retailers such as TJ Hughes and Jane Norman, have entered administration following weak trading but their suppliers may have been unaware of the level of trouble these businesses were in.
James Cowper, a leading accountants and business consulting firm based in the south of England, has warned supply chain businesses that they make take measures to ensure they are not dragged under by these insolvencies.
Peter Whalley, Corporate Restructuring Expert & Partner at James Cowper, said: “We may technically be out of recession, but consumer confidence is fragile and people are cutting back on spending, which means that for those businesses in the retail supply chain there could be a worrying few months ahead.
“It is therefore vital that suppliers safeguard their own business as much as possible should one of their retail customers go into administration, particularly if they do not have, or cannot, secure credit insurance.”
There are a number of warning signs which supply chain firms should take heed of at this difficult time, according to James Cowper, including tired or rundown stores, low staff morale, late orders for seasonal products and excessive use of rummage sales.
Announcements made by a retailer’s head office, including constantly changing CEOs, profits warnings, and store closures, should also be scrutinised and assessed by its clients.
If a trader consistently makes late payments, argues over deliveries, has quality control issues or requests increased credit limits it may be time for a supply chain company to speak to the retailer’s management about their business relationship.
Worryingly for the industry, this reality of suppliers and partners becoming more cautious will of course have the knock-on effect on putting more pressure on beleaguered businesses.
Whalley added: “By being quick to spot any warning, businesses can act fast to protect themselves.
“Monitoring the financial press for profit warnings, shop closures, negotiations with landlords or with finance providers and reading about sales of the whole or parts of the business will give a good idea that a retailer may be going through a sticky trading period.”